NRI Account Meaning - Know What is NRI Account?

If you are a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO), you will likely have different banking and investment needs compared to residents of India. Living abroad means your income and savings are often in foreign currencies like the US Dollar, Euro, etc. As a result, you may need a specialised banking solution to manage your finances efficiently.
Many major banks and financial institutions in India offer NRI Accounts tailored to the needs of individuals living abroad. These accounts come with various features concerning currency denomination, ease of fund transfers, and tax implications. But what exactly is an NRI Account, and what types are available? Let’s explore these in detail.

An NRI Account is a bank account opened by a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) in a bank or financial institution authorised by the Reserve Bank of India (RBI).
These accounts are designed to effectively help NRIs manage their income and savings in India and abroad.

In order to cater to the diverse financial needs of NRIs, there are three primary types of NRI Accounts:

1. Non-Resident External (NRE) Account
2. Non-Resident Ordinary (NRO) Account
3. Foreign Currency Non-Resident (FCNR) Account

Non-Resident External (NRE) Account
An NRE Account is primarily designed to help NRIs transfer their foreign earnings to India seamlessly. Here are the key features:

• Currency Denomination: The NRE Account is rupee-denominated, meaning that all transactions in this account will be in Indian Rupees (INR).
• Account Types: NRE Accounts can be opened as Savings, Current, Fixed, or Recurring Deposit accounts.
• Tax Benefits: Interest earned from NRE Accounts is tax-exempt in India, making it an attractive option for NRIs who want to maximise their savings.
• Repatriation: Funds in NRE Accounts, including principal and interest, are fully repatriable. That means you can transfer money back to your country of residence without any restrictions.
• Joint Account: NRE Accounts can be opened jointly with a Resident Indian, but only on a ‘Former or Survivor’ basis. That means only the NRI account holder has the authority to operate the account, and the resident can access it only after the NRI’s demise.

Non-Resident Ordinary (NRO) Account
An NRO Account is ideal for managing income earned in India, such as rental income, dividends, or pension. Here’s what you need to know:

• Currency Denomination: Like the NRE Account, the NRO Account is also rupee-denominated.
• Account Types: NRO Accounts can be opened as Savings, Current, Recurring, or Fixed Deposit accounts.
• Source of Funds: You can deposit foreign earnings and income earned in India into an NRO Account. However, foreign earnings are subject to conversion into INR.
• Taxation: Interest earned from an NRO Account is subject to tax in India. The tax rate is typically 30% plus applicable surcharge and cess. However, you can benefit from Double Taxation Avoidance Agreements (DTAA) to lower the tax burden.
• Repatriation: The principal amount in the NRO Account has restricted repatriation, up to USD 1 million per financial year. The interest earned, however, is fully repatriable after paying applicable taxes.
• Conversion Requirement: If an Indian citizen moves abroad for employment, their existing resident account should be converted to an NRO Account. It is crucial to inform the bank about the change in residency status to ensure compliance with regulations.
• Joint Account: NRO Accounts can be held jointly with a Resident Indian on a ‘Former or Survivor’ basis, similar to NRE Accounts.

Foreign Currency Non-Resident (FCNR) Account

The FCNR Account is best suited for NRIs wishing to maintain their savings in foreign currency and earn interest. Key features include:

• Currency Options: FCNR Accounts can be held in major foreign currencies, including US Dollars (USD), Canadian Dollars (CAD), Australian Dollars (AUD), Sterling Pounds (GBP), Euro (EUR), and Japanese Yen (JPY).
• Account Type: These accounts are available only as Fixed Deposit accounts.
• Maturity Period: FCNR Fixed Deposits can have maturity periods ranging from 1 year to 5 years, with the following options:
  • 1 year and above but less than 2 years
  • 2 years and above but less than 3 years
  • 3 years and above but less than 4 years
  • 4 years and above but less than 5 years
  • 5 years
• Tax Benefits: The principal and interest earned on FCNR deposits are tax-free as long as you maintain your NRI status.
• Repatriation: Both principal and interest are fully repatriable, making it easy for you to transfer funds back to your country of residence.

NRI Accounts offer a range of options to meet the diverse financial needs of Non-Resident Indians and Persons of Indian Origin. Whether you want to transfer your foreign earnings to India, manage income earned in India, or maintain savings in foreign currency, an NRI Account is designed to suit your needs.
Ready to open an NRI Account? Contact your bank to find out more and get started today!
For more information on how NRIs can benefit from currency fluctuations, click here to learn more!
The information provided in this article is generic and for informational purposes only. It does not substitute for specific financial advice.